An earthquake of Richter 8.9. A tsunami within hours; followed by the grave news of explosions in nuclear reactors. Japan is in the midst of an unprecedented crisis. In this series of unexpected happenings, event risk returned to haunt global stock markets.

In a globalized world, our markets ought to have been impacted by the 20 pc drop in the Nikkei over two trading sessions. Many earlier events have seen our markets mirroring global trends. Trading on our bourses however seem to be relatively calm. The enormity of the problem is still sinking and selling may well happen in the days ahead. The crisis in Japan will impact global investor sentiment in the near term as money gets reallocated and risk averse capital takes flight to safe havens. Markets will head lower till investors tire of selling and sheer selling fatigue will probably reverse sentiment. It is hard to predict when this will take place.

What should Indian retail investors be doing when global sentiment is weak and dominated by fear ? Should we follow the global trends and stay out or should we make use of this opportunity thrown before us ? My view is that we must put events aside and focus on the earnings of corporate India. In the long run, you will agree that it is the earnings that determine the valuation of businesses.

The Indian economy will face a limited impact as exporting businesses may see some uncertainty in the near term. But, the overall impact of the Japan crisis on our economy is limited . In fact, the price trends in commodities is more important to us in the near term. The reasoning is simple. India is a commodity centric stock market. Our index pivotal outside of banking and IT are mostly commodity-centric businesses. The commodity producing sectors like metals, petroleum refining, coal, petrochem and oil exploration have a high weightage in our indices. Commodity consuming businesses like power, cement and auto also have a reasonable weightage. High commodity prices are not good for our economy as we need more forex to meet our oil and natural resource requirements. This will raise our costs and impact consumption. Therefore a fall in the prices of major commodities like oil, coal, iron ore and metals will ease the cost structure of several businesses. The fiscal targets of the country will also be met only if the prices of commodities head lower. Overall , the index earnings will have greater stability in a scenario of lower commodity prices and earnings growth is only subject to this happening. If commodity prices cool, inflation will also reduce and interest rates will start heading south. This will lead to sustained consumption and several key sectors like cement , auto, power , aviation and petroleum will see profitable growth. Eventually, this will result in earnings expansion returning to our companies. Earnings expansion will eventually see the PE growth reflect in our stock markets. It is in this scenario that markets will turn bullish and hit new highs.

In summary, investors must pay greater emphasis to earnings and allow events to die down . The thrust should be on understanding the impact of commodity prices as they enter a phase of high volatility. Rather than getting perturbed by the short-term fluctuations in commodities , investors must read the long-term trend lines . If the trend in commodities is decisively down, investors can return to buying stocks of commodity-user companies . The consumption story will revive and we will see the markets hitting new highs. The volatility in the interim should be patiently watched out and investors must conserve their resources to buy India-centric businesses when commodities cool down. Earnings and not events must be the decision variable in our investing process.

Samyuktha holds an undergraduate degree in Mathematics from Stella Maris College, Chennai. She has also completed Investment Advisory qualifications conducted by NISM (National Institute of Securities Markets). She began her career as an analyst with Goldman Sachs. She is an autodidact, and has spent the last few years acquiring knowledge on financial markets and financial planning.

Gayathri

Gayathri Muraly, a qualified Chartered Accountant, is part of ithought’s financial planning team. An All India rank holder in the CA final examination, she has worked with S.R. Batliboi & Associates (Member Firm of Ernst & Young Global), in their audit and assurance services segment. She has been a prolific achiever throughout her academic pursuits and career. She has a wealth of experience in Accounting, Audit and Finance across diverse industries. Her functional skills include understanding businesses and their financial statements. She has also worked on tax and risk management solutions for clients.

Prashanth

Prashanth studied business administration and data analytics in college. Having joined ithought’s financial planning team in 2015, he has three years of industry experience. He enjoys working with numbers and is passionate about simplifying client experience. Prashanth is also an ardent football fan and an aspiring marathon runner.

Gaurav

Gaurav Jain is a qualified chartered accountant and has more than five years of work experience in the accounting and finance industry. He completed his graduation from Loyola College, Chennai. After having worked with companies like KPMG, Goldman Sachs and Barclays, Gaurav decided to work with a full-fledged financial advisory firm and joined ithought in 2015. He heads ithought’s financial planning desk, longitude.

Vikash

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Rashmika

Rashmika graduated from Ethiraj College for Women with a Bachelor’s degree in Commerce. She is a conscientious and meticulous professional. Prior to working with ithought, Rashmika worked at Goldman Sachs.

Maruthi

Maruthi has an engineering degree in Electrical & Electronics from VIT University. His first position was with TCS Ltd where he worked as a developer for a leading UK Bank’s Investment Banking Division. He followed it up with PGDM from IIM Ahmedabad and worked in sales & business development roles for two years in Healthcare and Real Estate firms, before joining ithought in 2015. He is a dedicated relationship manager focused on improving client experience.

Anirudh

Anirudh is a relationship manager at ithought, specializing in business development and client management. He has been with ithought since 2012 and enjoys being a part of the growing business. He has a Master’s degree in Accounting & Finance from the London School of Economics. He never misses a game of basketball on the weekends.

Amit

Amit Parakh is an engineer by design and a personal financial services advisor by passion. He has a wealth of experience in the financial services industry. Amit has spent more than two decades working with banks, asset management companies (AMCs), and financial advisory firms. After having worked with HSBC, HDFC SLIC, and ICICI Prudential Mutual Fund on Sales Strategy, Product Communication, and Distribution, Amit was keen to transition to the client facing side and help clients through their financial journeys. His value systems in client service are closely aligned with ithought’s and he joined us in 2015.

Ajay Kumar

Ajay is a commerce graduate from Loyola College, Chennai and has been working as a relationship manager with ithought since 2010. During his time here, he has developed a keen interest in value investing and financial planning. He is known for his warmth and is committed to client service. Ajay is also a professional cricketer and is passionate about traveling.

Prasath

Prasath Raj has been with ithought from inception and has over twelve years of experience in financial markets. He is a Commerce Graduate with an MBA in Finance. He is also a derivatives specialist and has extensive knowledge on equity shares and mutual funds. Prasath is a voracious reader and leverages his extensive knowledgebase to provide unique insights. He utilizes these competencies to formulate sound investment strategies for our clients.

Niranjan

Niranjan is an applied Mathematics Graduate from the College of Engineering, Guindy. In addition, he has cleared the FRM (Financial Risk Manager) certification exam from GARP (Global Association Of Risk Professionals). Niranjan has an avid interest for financial markets and has been following equity markets since his school days. He has been an active investor for over sixteen years. Niranjan has been involved with strategy at ithought for over seven years now.